At the start of this year, markets were practically certain the Fed would cut rates before 2027. Over 90% certain, to be precise. That number has since cratered to 32.9% on Kalshi, the regulated prediction market, marking the lowest reading in months and a stark reversal of sentiment that has implications across every asset class, crypto included.

What’s behind the collapse in rate-cut odds

The Federal Reserve is widely expected to hold its target rate at 3.50-3.75% following its April 29, 2026 meeting. What’s notable is the growing consensus that rates will stay parked there for a very long time.

Bank of America and the CME FedWatch Tool both point to less than 50% odds of any rate cut materializing until at least the second half of 2027. Polymarket and Kalshi forecasts are even more blunt for the near term: traders assign 57-97% odds of no change at the June 16-17 FOMC meeting.

The implied probability of a rate hike in 2027 has climbed to 45%. Prediction markets now see it as nearly a coin flip that the Fed’s next move is tightening, not loosening.

Why crypto investors should care

The higher-for-longer narrative has already been weighing on digital asset prices. Bitcoin and Ethereum have both faced headwinds as the market digests the reality that the cheap-money era isn’t coming back anytime soon. Elevated borrowing costs reduce the amount of leverage in the system, institutional allocators shift toward fixed-income instruments offering attractive real yields, and retail investors feel the pinch of higher mortgage and credit card rates eating into their disposable income.

The shift from 90%-plus confidence in a rate cut to just 32.9% represents one of the more dramatic repricing events in recent memory for monetary policy expectations.

The geopolitical wildcard

Energy prices have been a persistent thorn in the Fed’s side throughout this cycle, and recent developments involving Iran have only made things worse. Oil-driven inflation is particularly tricky for central bankers because it’s supply-side in nature. The Fed can’t drill for oil.

Traders should watch the June FOMC meeting closely, not because a cut is likely, but because the Fed’s language around inflation and forward guidance could either solidify or soften the higher-for-longer consensus. The prediction market data suggests a dovish surprise is not the way to bet right now.

The more uncomfortable scenario for crypto holders is one where the 45% rate-hike probability continues climbing. A Fed that moves to tighten further in 2027 would represent a genuine paradigm shift for digital assets.